Driven by both strong demand for development sites suitable for both “first-mile” and “last-mile” distribution centers, and by a diminishing supply of such sites, industrial land prices rose sharply in 2017, according to a report released last week by CBRE. In the 10 most active warehouse construction markets, the report states, “rising land prices are contributing to higher rental rates….”

Nationally, CBRE found that the average per-acre price for large industrial parcels of 50 to 100 acres, those suitable for development of large, regional warehouses, increased to more than $100,000 per acre from roughly $50,000 a year ago. In parallel with that trend, industrial plots of five to 10 acres, suited for smaller, infill distribution centers in metropolitan settings, climbed to more than $250,000 per acre this year from roughly $200,000 a year ago.

On a percentage basis, California’s Inland Empire saw the largest increase, of 35 percent, which resulted in an average per-acre cost of about $980,000 for prime warehouse development land. Northern New Jersey topped the chart for average price, at $1.8 million per acre, a 17 percent increase from 2016.

Numerous other major markets saw double-digit increases in industrial land prices, including Las Vegas (up 17 percent to $220,000), Chicago (up 16 percent to $250,000), Atlanta (up 14 percent to $100,000), Houston (up 14 percent to $196,000) and Central New Jersey (up 10 percent to $650,000). In many cases, the markets that registered substantial gains in land prices also saw increases in average asking rents.

“As a result of the shift in consumer purchasing, there’s been a change in the tenant requirements of industrial occupiers who service those consumers,” Thomas Monahan, an Executive Vice President with CBRE, said in a prepared statement. “Scarcity of both existing inventory and larger sites to accommodate these buildings has placed upward pressure on pricing, pushing land prices and rents to unprecedented levels.”